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Mike Kosares: Quietly the advantage in gold goes to private investors

Section: Daily Dispatches

Big Banks, Hedge Funds Key Factors in 2016 Gold Surge

By Michael Kosares, Editor
USAGold's News & Views
USAGold, Denver
Tuesday, April 5, 2016

I can remember only one other time when market factors lined up as favorably for gold as they do now and that was in the spring of 2008. There are a great many similarities to gold market dynamics between now and then, but there are also great differences. One of those differences is the huge influx of interest from institutional investors led by hedge funds and big banks. In 2008 institutional interest was light.

Now HSBC, JP Morgan Chase, Bank of America Merrill Lynch, ABN Amro, UBS, and Deutsche Bank, PIMCO, and BlackRock head a growing list of investment houses that view gold favorably. In what could turn out to be the first among many such announcements, Munich Re, the giant German reinsurer, said it was adding gold to its reserves in the face of negative interest rates. Chief Executive Nikolaus von Bomhard told a news conference, "We are just trying it out, but you can see how serious the situation is." ...

The fact of the matter is that there is not enough gold in size available to accommodate a doubling of already strong central bank demand. At current prices the availability of metal comes nowhere near matching the availability of capital. China, for example, is hoping against hope that it will have enough time to beef up its holdings sufficiently before a full-blown currency crisis. Barring a miracle on the supply side of the fundamentals ledger, the likelihood is that they will come up short.

This is a case where, for once, the private investor has the advantage. Individuals can still buy gold and silver in sufficient quantity to achieve their portfolio goals (and quickly if so required). What we do not know is how long under the circumstances that advantage will remain on the table. ...

... For the remainder of the commentary:


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Tuesday-Thursday, April 5-7, 2016
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